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Balance Sheet Terms
The Balance Sheet is one of the two most common financial statements produced by accountants. This section pertains to potentially confusing terms that relate to the balance sheet.
1. Accounts Payable (AP)
Accounts Payable include all of the expenses that a business has incurred but has not yet paid. This account is recorded as a liability on the Balance Sheet as it is a debt owed by the company.
2. Accounts Receivable (AR)
Accounts Receivable include all of the revenue (sales) that a company has provided but has not yet collected payment on. This account is on the Balance Sheet, recorded as an asset that will likely convert to cash in the short-term.
3. Accrued Expense
An expense that been incurred but hasn’t been paid is described by the term Accrued Expense.
4. Asset (A)
Anything the company owns that has monetary value. These are listed in order of liquidity, from cash (the most liquid) to land (least liquid).
5. Balance Sheet (BS)
A financial statement that reports on all of a company’s assets, liabilities, and equity. As suggested by its name, a balance sheet abides by the equation.
6. Book Value (BV)
As an asset is depreciated, it loses value. The Book Value shows the original value of an Asset, less any accumulated Depreciation.
7. Equity (E)
Equity denotes the value left over after liabilities have been removed. Recall the equation Assets = Liabilities + Equity. If you take your Assets and subtract your Liabilities, you are left with Equity, which is the portion of the company that is owned by the investors and owners.
8. Inventory
Inventory is the term used to classify the assets that a company has purchased to sell to its customers that remain unsold. As these items are sold to customers, the inventory account will lower.
9. Liability (L)
All debts that a company has yet to pay are referred to as Liabilities. Common liabilities include Accounts Payable, Payroll, and Loans.
Income Statement Terms
The Income Statement AKA Profit and Loss Statement is the second of the two common financial statements. These are the terms that are most commonly used in reference with this reporting tool.
10. Cost of Goods Sold (COGS)
Cost of Goods Sold are the expenses that directly relate to the creation of a product or service. Not included in this category are those costs that are needed to run the business. An example of COGS would be the cost of Materials, or the Direct Labor to provide a service.
11. Depreciation (Dep)
Depreciation is the term that accounts for the loss of value in an asset over time. Generally, an asset has to have substantial value in order to warrant depreciating it. Common assets to be depreciated are automobiles and equipment. Depreciation appears on the Income Statement as an expense and is often categorized as a “Non-Cash Expense” since it doesn’t have a direct impact on a company’s cash position.
12. Expense (Cost)
An Expense is any cost incurred by the business.
13. Gross Margin (GM)
Gross Margin is a percentage calculated by taking Gross Profit and dividing by Revenue for the same period. It represents the profitability of a company after deducting the Cost of Goods Sold.
14. Gross Profit (GP)
Gross Profit indicates the profitability of a company in dollars, without taking overhead expenses into account. It is calculated by subtracting the Cost of Goods Sold from Revenue for the same period.
The Balance Sheet is one of the two most common financial statements produced by accountants. This section pertains to potentially confusing terms that relate to the balance sheet.
1. Accounts Payable (AP)
Accounts Payable include all of the expenses that a business has incurred but has not yet paid. This account is recorded as a liability on the Balance Sheet as it is a debt owed by the company.
2. Accounts Receivable (AR)
Accounts Receivable include all of the revenue (sales) that a company has provided but has not yet collected payment on. This account is on the Balance Sheet, recorded as an asset that will likely convert to cash in the short-term.
3. Accrued Expense
An expense that been incurred but hasn’t been paid is described by the term Accrued Expense.
4. Asset (A)
Anything the company owns that has monetary value. These are listed in order of liquidity, from cash (the most liquid) to land (least liquid).
5. Balance Sheet (BS)
A financial statement that reports on all of a company’s assets, liabilities, and equity. As suggested by its name, a balance sheet abides by the equation
6. Book Value (BV)
As an asset is depreciated, it loses value. The Book Value shows the original value of an Asset, less any accumulated Depreciation.
7. Equity (E)
Equity denotes the value left over after liabilities have been removed. Recall the equation Assets = Liabilities + Equity. If you take your Assets and subtract your Liabilities, you are left with Equity, which is the portion of the company that is owned by the investors and owners.
8. Inventory
Inventory is the term used to classify the assets that a company has purchased to sell to its customers that remain unsold. As these items are sold to customers, the inventory account will lower.
9. Liability (L)
All debts that a company has yet to pay are referred to as Liabilities. Common liabilities include Accounts Payable, Payroll, and Loans.
Income Statement Terms
The Income Statement AKA Profit and Loss Statement is the second of the two common financial statements. These are the terms that are most commonly used in reference with this reporting tool.
10. Cost of Goods Sold (COGS)
Cost of Goods Sold are the expenses that directly relate to the creation of a product or service. Not included in this category are those costs that are needed to run the business. An example of COGS would be the cost of Materials, or the Direct Labor to provide a service.
11. Depreciation (Dep)
Depreciation is the term that accounts for the loss of value in an asset over time. Generally, an asset has to have substantial value in order to warrant depreciating it. Common assets to be depreciated are automobiles and equipment. Depreciation appears on the Income Statement as an expense and is often categorized as a “Non-Cash Expense” since it doesn’t have a direct impact on a company’s cash position.
12. Expense (Cost)
An Expense is any cost incurred by the business.
13. Gross Margin (GM)
Gross Margin is a percentage calculated by taking Gross Profit and dividing by Revenue for the same period. It represents the profitability of a company after deducting the Cost of Goods Sold.
14. Gross Profit (GP)
Gross Profit indicates the profitability of a company in dollars, without taking overhead expenses into account. It is calculated by subtracting the Cost of Goods Sold from Revenue for the same period.
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to do share your views about voucher , revenues etc etc please Related: 01- Some Basic Accounting Terminologies - Class 11 - Accountancy
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